Financial stress is a state of fear or worry related to money. This fear can be caused by debt, unmanageable expenses, or the lack of an adequate safety net. In many cases, a person’s income inversely correlates with their financial stress, which is why factors like low job security, inadequate compensation or benefits, or a lack of growth opportunities at work all tie into it. In this article, we will examine the mental health effects of financial stress and how your organisation can support your employees through it.
The Covid-19 pandemic, and the following environment of high inflation, has driven up stress for many working people. In a survey by PwC last year, 63% of employees reported that their financial stress had increased since the beginning of the pandemic. Some groups of people might be more susceptible to this financial stress: new entrants to the workforce, people on probation, single-income families, and people from certain socioeconomic classes.
Here’s how financial stress can hamper someone's daily life.
Impact of Financial Stress on Health
Like any other kind of stress, financial stress has been linked to physical problems like headaches, stomach-aches, migraine, heart disease, diabetes, and sleep problems. It may also cause pre-existing health conditions to flare up.
Financial stress may also manifest emotionally. A person may become withdrawn or anxious around other people. It can also affect one’s behaviour, causing them to avoid conversations regarding finance altogether, cancel social plans, or avoid friends and relatives.
Whether immediately or in the long run, financial insecurity can affect one’s quality of work, may cause absenteeism, and even influence team performance.
It can also lead to delayed healthcare. Poor finances reduce the chances of a person seeking treatment, which then further exacerbates the problem and the cost of treatment as well.
Financial security is therefore, as much a responsibility of the company as the individual. Supporting employees — whether through personal issues or an uncertain macroeconomic environment — helps ensure their wellbeing and engagement at work.
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How Your Company Can Enhance Employees’ Financial Security
Improve financial literacy: Organise workshops on topics like filing tax returns, saving and investing, retirement planning, and budgeting. These sessions can be outsourced to professionals, but having regular discussions within the workplace is also important to raise awareness.
Conducting surveys to understand employees’ awareness, attitudes, and knowledge around financial matters can give the company direction on what to focus on in terms of policies and support resources.
Doing this creates financially-informed employees, preemptively helps minimise financial stress, and encourages employees to reach out to the organisation if in distress.
Provide opportunities for financial stability: As an organisation, you can take steps to help your people mitigate financial stress. For instance, having comprehensive employee health insurance cover, which includes coverage for mental health issues, shows that your company is serious about investing in employees’ holistic wellbeing.
You can also look at setting up additional facilities to enable your people to navigate unexpected situations. This could include facilities like salary advances or special loans to those in severe need or during distressing times (like the beginning of the lockdown). Some organisations even have platforms that allow employees to access their wages as and when required, rather than waiting until the end of the month, to cope with unplanned expenses.
Create a culture of transparency: Uncertainty, more so around money matters, can be a big source of worry. As an organisation, you have the responsibility to be open and clear on matters regarding finances. This includes giving information on policies, changes in salary structure or appraisals, and addressing concerns like delayed salaries or promotions. Such assurances build confidence that the organisation is invested in the employee.
Allocate a budget for financial wellness: You can appoint a finance professional or advisor, either full or part-time, who becomes the go-to person for your employees with money-related concerns. If you have a workplace wellbeing partner, ask if they are equipped to discuss financial stress with employees. It goes without saying that access to company-facilitated counsellors is also important to support the mental health of people through difficult times.
Fill the gaps: Find out what kind of financial security benefits or perks are being offered by other employers in your industry. If possible, leverage your industry contacts to find out how these measures have translated into tangible benefits for those companies. Use this knowledge to fill the gaps in your own organisation and also share it with others.
Morgan Housel wrote in his book Psychology of Money: "Doing well with money has a little to do with how smart you are and a lot to do with how you behave." It's time companies actively help employees identify their financial patterns and work towards adopting healthy ones.